Amy Myers Jaffe Disses Oil, Gas, and Houston

By Robert Bradley Jr. -- March 31, 2022

“Amy Meyers Jaffe, Chris Tomlinson, Jeffrey Sachs–so confident, so angry, so wrong about energy. In psychological terms, they are in denial about climate exaggeration and the verdict from energy density for consumer wants and necessities.”

“Other (pre-Jaffe) ‘Kodak Moments’ dissing fossil fuels have been published in 2015 here; 2016 here; 2018 here; 2019 here and here; and 2021 here. Idea plagiarism?”

CERAWeek 2022 was a rude comeuppance for the hyper-critics [haters?] of oil and gas, who found themselves marginalized not only by world events but also by the Biden Administration itself. Drill, baby, drill was the word from DOE’s First Lady. [1] But Houston Chronicle business editorialist Chris Tomlinson had to get his punches in, embarrassingly so given his strong emotions and elephantine conflict of interest.

Now comes Amy Myers Jaffe, once affiliated with Rice University’s Baker Institute and now ensconced at Tufts University’s Fletcher School. Her Houston Chronicle editorial, “A Kodak Moment Is Coming for Oil Executives” (March 11, 2022) deserves a critical parsing. [2]

Her main theme is that the oil and gas industry got lucky with recent world events and a non-innovative industry gets to price-gouge consumers for a longer lifespan. In her words:

In the midst of the largest global energy crisis since the 1970s, the need for innovation couldn’t be more compelling. However, there appears to be a retrograde “I told you so” meme circulating around the oil patch arguing that collecting windfalls from a geopolitically driven oil and gas price surge is evidence of smart business strategy, somehow proving that innovation was stupid in the first place.

Say again? A mineral industry that is not technologically driven, continually overcoming the “limits to nature” by expanding ‘depleting’ supplies? Oil and gas extraction and each-and-every midstream and downstream movement are as high-tech as there can be. If Jaffe knows of a profitable gap in their IT, she has a lot of value to add and money to make.

This low blow is followed by another:

As the oil industry — here and abroad — bilks consumers and comes up with convoluted explanations for why it cannot drill, governments are actively looking for new solutions that will accelerate the decoupling of economic growth from oil. This oil shock will be no different than shocks past in propelling alternative energy and energy-efficiency technology adoption, except that the technological solutions to come this time are already sitting on a shelf.

So government knows the technological future better than the profit-seeking firms engaged in voluntary transactions? Perhaps the lessons from synthetic fuels from World War II until the early 1980s should be revisited.

Jaffe then disses Houston:

Today, parts of the energy world are notable for rapid innovation — but not necessarily in the oil halls of Houston. For example, Exxon Mobil is using its capital to buy back its own stock shares and rewarding investors with dividend payouts. In the midst of a giant energy crisis, that financially driven strategy may eventually seem short-sighted, as it did after the 2008 price shock.

Perhaps some of this has to do with the climate politics of trying to starve the fossil fuels industries of capital? The ESG movement. The Genser-led SEC movement… Jaffe, to the extent she is a scholar and not a pundit in her academic setting, should explore this theme and report back.

Jaffe then turns into the oracle of wisdom in he op-ed, again knowing what the self-interested, money-seeking oil and gas industry does not:

New smarter, digital energy products and technologies were already gaining traction with consumers in light of COVID and changing generational behavior and attitudes. The energy price shocks accompanying the Russia-Ukraine crisis could make change a necessity. That raises questions of whether American oil company CEOs are prepared to adapt their businesses.

She then commits an historical misinterpretation:

Texas itself, still reeling from its electricity crisis last winter, is working to integrate more battery storage into its grid operations. One alternative whose tires are being kicked is the use of Virtual Power Plants. These are networks where generated energy — often from renewables — is aggregated in small household-sized batteries across a wider number of consumers. A portion of the stored energy is made contractually accessible to the grid en masse, creating backup supply for when an unexpected surge in demand from a cold snap or heat wave needs to be addressed near instantaneously. Australia was a first mover on virtual power plant installation.

No. Texas’s massive grid failure last year was not because of natural gas or coal or nuclear–it was because of wind and solar that wounded these reliables. A decade of forced integration and margin deterioration from low-marginal-cost renewables (wind can and does bid negative to get into the ERCOT central- planning queue). Incentives matter, and Atlas Shrugged.

Recreating a power grid with wind, solar, and batteries is technically possible in some sense, but costs matter when the energy it is replacing comes with its own storage in practical terms.

It’s all PR and momentum to Jaffe, not energy fundamentals (energy density, cost economics):

Consumers are also seeking products to help them lower their emissions. Google recently announced intelligent automation for its Nest thermostat to automatically optimize household appliance electricity use to match peak provision of renewable energy by local energy providers. The Super Bowl was filled with advertisements for electric vehicles, which might be all the more enticing as gasoline prices continue to climb. Such prospects have convinced at least a few oil CEOs to invest in charging stations.

She goes on to list the good actors in the oil patch who are investing in what she sees as the innovative future … but:

Despite these welcome advances, many oil company CEOs have not yet had to exercise corporate strategies that involve new product competition. It’s a deficit that is going to matter going forward.

… New product development requires smart research and development coupled with market intelligence on changing client preferences, future competitor offerings and technology innovation trends. Strategies surrounding new product development need to include thoughtful planning around “creative destruction,” where a new product might eventually eliminate the need for a firm’s other signature products.

If oil does not reform, they, like Kodak, will wither in the wind of stasis. Jaffe is sure the investors will know what she does:

Successful energy CEOs will be the ones who can learn and excel at product development and integrate innovation into their future business planning. Eventually, investors will distinguish which C-suites will deliver innovation best in the energy transition and which ones won’t, the same way they figured out who had the best acreage for fracking. Stock prices will adjust when the dust of high oil prices clear.

And her touché:

It’s a Kodak moment, and not for the scenery. It’s a shame that more energy CEOs don’t get that.

And can millions of investors be wrong to see appreciating stock prices and robust dividends as an instant refutation of an arm-chair academic?

Jaffe’s Kodak Moments

Jaffe is just a bit too arrogant in her confidence that free consumers are wrong and government-led energy transformation is right–and the future. After all, what rules is energy quality and affordability, one step removed from energy density. She forgets that what is economic is a small subset of what is technologically feasible. Occam’s energy Razor, so to speak.

Turns out, Jaffe has had her own Kodak Moments. Here is one I chronicled three years ago at MasterResource. She stated:

I have long been noted for ability to call turning points for industry: this suicide is one. Current industry support of EPA will create massive political backlash such as never seen before in US. “My early death by fossil fuel reflects what we are doing to ourselves.” D. Buckel.

Jaffe is speaking about a mentally ill environmentalist who doused himself in gasoline and lit a match. But even the tribe did not seize upon this act as some sort of a heroic moment. It was a selfish, wrong-headed stunt by a person who did not want to question his own views–and spare everyone else.

Conclusion

Amy Meyers Jaffe, Chris Tomlinson, Jeffrey Sachs–so confident, so angry, so wrong about energy. In psychological terms, they are in denial about climate exaggeration and the verdict from energy density for consumer wants and necessities.

But these voices are on top of the politically correct mountain. Top positions of influence and prestige. Confirmation bias. But the force of reality, even with strong political headwinds, are at work. The fossil-fuel era is still young–and improving step by technological step. Expect the superior energies to win on economic and ecological grounds in a free society.

Appendix: Energy Futurist?

Vijay Vaitheeswaran, global energy & climate innovation editor at The Economist, is in the climate/’energy transition’ vanguard. And when he recently described Jaffe as an “energy futurist” on social media, it caught my eye.

But she was wrong on Peak Oil (“By 2003, global production will peak and the oil age will start to end,” she stated in 2000). And her prediction of Peak Oil Demand by 2035, her view since at least 2013, is off to a rocky start. Strike 3 on the suicide, discussed above, and she is all but out.

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[1] DOE Secretary Graham on a pre-CERA Zoom call with oil and gas executives:

On a Zoom call Monday, Energy Secretary Jennifer Granholm essentially warned oil and gas company executives that their industry is dying, advising them to diversify their business portfolios or risk becoming like Blockbuster or Kodak, two former corporate behemoths that famously failed to adopt to rapid shifts in their markets. “The bottom line is you have got to move,” Granholm said, as quoted by Argus. “You cannot hang on and be the Kodak or the Blockbuster Video of the energy world. You have got to diversify.”

And then Granholm several months later at CERA:

We are on a war footing—an emergency—and we have to responsibly increase short-term [oil and gas] supply…. And that means you producing more right now, where and if you can.

[2] Jaffe’s editorial was preceded by (taken from?) “A Kodak Moment for the Oil Companies,” a commentary published last year by Sutton Technical Books, which specializes in “books to do with climate change and ‘Net Zero’ programs.” Other (pre-Jaffe) ‘Kodak Moments’ dissing fossil fuels have been published in 2015 here; 2016 here; 2018 here; 2019 here and here; and 2021 here. Idea plagiarism?”